MISTAKE
‘Mistake’ in general meaning is something that does not work out in search of a solution. Word ‘Mistake’ is used interchangeably with ‘error’. In law, misunderstanding or erroneous belief about a material fact may prevent the formation of a valid contract.
According to SECTION 10 of the Indian Contract Act 1872, Free consent of parties is an essential element of any contract.
SECTION 14 of the Indian Contract Act states that ‘Free consent means consent not caused by coercion, undue influence, fraud, misrepresentation and mistake’.
A mistake means ‘believe in those things which do not exist in reality’. Thus, the mistake is an erroneous belief.
DEFINITION OF MISTAKE
‘Mistake’ is not defined in the Indian Contract Act. SECTION 20, 21 AND 22 deals with the concept related to mistake. ‘Mistake’ can be defined as any action, decision or judgement that produced an unwanted and unintentional result. A Mistake is said to have occurred where parties intending to do one thing by error do something else.
Phillips v. Brooks Ltd is an English contract law case concerning mistake. It was held in this case that a person is deemed to contract with the person in front of them unless they can substantially prove that they instead of them intended to deal with another person.
TYPES OF MISTAKE
The mistake is nowhere provided in the Indian Contract Act, but SECTIONS 20, 21, and 22 provide provisions relating to the mistake. There are two types of mistakes provided under the Indian Contract Act, 1872,
These are;
1. MISTAKE OF LAW (SEC. 21)
2. MISTAKE OF FACT (SEC. 20 & 22)
MISTAKE OF LAW ( SECTION 21 )
There is a Latin maxim ignorantia juris non-excusat, which means ignorance of the law is not excusable.
There are two types of mistake of law can be derived under SECTION 21 of the Indian Contract Act, 1872.
These are;
1. Mistake concerning Indian law
2. Mistake concerning Foreign law
GRANT V. BORG
In this case, the person was not knowing the clauses of the Immigration Act 1971, for staying beyond the time limit by the leave. Here, he cannot apply for defence under the mistake of law.
- MISTAKE AS TO INDIAN LAW
The mistake of law has been provided under SECTION 21 of the Indian Contract Act, 1872. It states a contract is not voidable because it was caused by a mistake as to any law in force in India. But, a mistake of law that is not in force in India has the same effect as a mistake of fact.
Here, SECTION 21 states that a contract cannot be voidable due to the mistake of the contracting parties in understanding any laws or enactments which are enforced in India.
The parties to the contract cannot claim relief because they were not aware of the Indian Law or not understood the provisions of any legal provision provided under laws enforced in India.
Therefore, if there is a mistake of Indian law by both the contracting parties then the contract is not voidable i.e. bilateral mistake of Indian law is void. And, If there is a mistake of Indian law by one contracting party then the contract is not voidable i.e. unilateral mistake of Indian law is valid.
- MISTAKE AS TO A FOREIGN LAW
The mistake of foreign law has been provided under SECTION 21 and specifies that the mistake regarding foreign law shall be treated as a mistake of fact. In India, it is expected that the parties to the contract are not always aware of the legal provision of the foreign laws.
Therefore, if any person enters into a contract with a foreign country without getting knowledge of specific provisions of law that are mandatory for the performance of the contract then this mistake of foreign law is treated as a mistake of fact.
Hence, if there is a mistake of the foreign law by both the contracting parties then the contract is considered as void i.e. bilateral mistake of foreign law and if there is a mistake of foreign law by one party then the contract is considered as valid i.e. unilateral mistake of foreign law.
CASE LAW: COOPER VS PHIBBS 1867
In this case, the plaintiff has taken a lease of fishery right from the defendant and he was unaware of the fact he already had a life interest in the fishery right. And, the plaintiff filed a suit for cancellation of the lease. But the court held that there was a mistake of law on the side of the plaintiff, therefore the court dismissed the suit.
MISTAKE OF FACT
The mistake of fact meaning has been provided under SECTIONS 20 AND 22 of the Indian Contract Act, 1872. The agreement is said to be void where both the parties to an agreement are under a mistake as to a matter of fact that is essential to the agreement.
There is a Latin maxim, ignorantia facti excusat, which means the ignorance of fact is excusable.
The two types of mistake of fact have been provided under SECTIONS 20 AND 22 of the Indian Contract Act, 1872.
Let’s discuss them;
1. BILATERAL MISTAKE
2. UNILATERAL MISTAKE
In the case of THE STATE OF MAHARASHTRA VS MAYER HANS GEORGE, A is an officer of the court and he is ordered to arrest Y. A arrests Z by mistake, as he believes Z is Y. Here, A can take the base of bona fide intention as a defence in the mistake of fact.
- BILATERAL MISTAKE
The bilateral mistake meaning has been provided under SECTION 20 of the Indian Contract Act, 1872. Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
SECTION 20 states that the bilateral mistake of fact is applied when the following conditions are fulfilled;
- The mistake of fact must be committed by both the parties to an agreement,
- The mistake as a matter of fact and not mistake of law
- The mistake of fact must be in relation with the essential to an agreement.
TYPES OF BILATERAL MISTAKE
Types of bilateral mistake have been given under as;
1. MISTAKE AS TO THE EXISTENCE OF THE SUBJECT MATTER
When the subject matter of an agreement is essential in a contract and if the subject matter of the contract is not in existence before the agreement was made by the parties may not be aware of the nonexistence of the subject matter then it is considered as the contract has been perished and hence the agreement would be void.
FOR EXAMPLE : ‘A’ and ‘B’ are involved in a contract to sell a horse in a specific amount. But, horse dies before the contract is performed and both the parties (A and B) are unaware of this fact that the horse does not exist. In this case, the Contract is void.
2. MISTAKE AS TO THE QUALITY OR QUANTITY OF THE SUBJECT MATTER
If the contracting parties are not mistaken regarding the existence of the subject matter but with regarding the quality or quantity of the subject matter then the said contract is said to be void
FOR EXAMPLE : ‘A’ and ‘B’ made a contract in which a transaction of 200 pens in return of some amount involves. But 100 pens are sold early by the brother of ‘A’ before the contract could be performed and both the parties (A and B) were unaware of this fact that only 100 articles do exist. In this case, the contract is void.
3. MISTAKE AS TO THE TITLE OF THE SUBJECT MATTER
Sometimes, the buyer wants to purchase the goods or property from the seller but he may be already the owner of that property or goods and he does not aware of the fact. Here, both the parties are under a mistake about ownership of the said goods or property. Since the seller is not the owner of that said property so he cannot sell or transfer the said property and the contract becomes void.
4. MISTAKE AS TO THE PRICE OF THE SUBJECT MATTER
In some contracts, the parties are not aware of the actual price of the subject matter. And, the parties are making a contract with an invalid amount of the subject matter then the contract is considered void.
FOR EXAMPLE : ‘A’ and ‘B’ made a contract to sell things in consideration for some money which was not a valid amount and both the parties (A and B) are unaware of this fact. In this case, the Contract is void.
5. MISTAKE AS TO THE IDENTITY OF THE SUBJECT MATTER
The identity of the subject matter must be clear to the contracting parties. If the identity of the subject matter is not clear then the contract is considered void.
FOR EXAMPLE : ‘A’ and ‘B’ made a contract in which ‘A’ promise to sell his car to ‘B’. ‘A’ has two different types of car (one for racing and other for tourism purpose). Here, the real identity of the car is not clear and both the parties are thinking about different types of car. In this case, the Contract is void.
In the case of CUNDY V LINDSAY, it is held that contract as a mistake as a matter of identity will be automatically void.
6. MISTAKE AS TO THE POSSIBILITY OF THE SUBJECT MATTER
If the parties to the contract enter into a valid contract but at the performance of the contract they come to know that the performance of the contract is not possible. Hence, the contract is said to be void as both the parties are under mistake as to the possibility of performance of the contract.
IMPOSSIBILITY CAN BE OF TWO TYPES:
PHYSICAL IMPOSSIBILITY – When any performance of a contract when physically impossible to perform then there is no valid contract.
FOR EXAMPLE - a painter made a contract with a person to paint a house but before the performance of duties, the house burns. Now, it is impossible for the painter to perform his duties under the contract. Thus, it is considered as an excuse for non-performance of duties.
LEGAL IMPOSSIBILITY – When any performance of a contract when legally impossible to perform then there is no valid contract.
FOR EXAMPLE - any amendment made by legislation which makes it impossible to fulfil the performance of duties under the contract.
- UNILATERAL MISTAKE
The meaning of unilateral mistake has been provided under SECTION 22 of the Indian Contract Act, 1872. It means a contract is not said to be voidable merely because it was caused by one of the parties to contract to it being under a mistake as to a matter of fact.
In the unilateral mistake of fact, one of the parties is under a mistake as to the matter of fact. And, the unilateral mistake does not affect the validity of the contract. This is the unilateral mistake example.
A unilateral mistake of fact makes a contract voidable under the following exceptions;
EXCEPTIONS TO THE UNILATERAL MISTAKE
1. MISTAKE BY ONE PARTY AS TO NATURE OF THE CONTRACT
When a mistake of fact is made by one contracting party regarding the nature of the contract being entered into and such a mistake is known to the other party, such a contract is said to be void.
FOR EXAMPLE - Suppose, any illiterate person gives thumbprint on any papers by mistake, then that contract formed because of thumbprint will be void.
2. MISTAKE BY ONE PARTY REGARDING THE IDENTITY OF THE PARTIES TO THE CONTRACT
In the formation of a valid contract, the identity of the parties is not required. But in a certain case like a unilateral mistake of fact, if a party makes a unilateral mistake as to the matter of fact regarding the identity of the other party then the contract is said to be void.
FOR EXAMPLE - If ‘A’ is a regular customer of ‘C’. He gives order to ‘C’ to deliver the goods. But he was not aware of the fact that ‘B’ is the new owner of the shop and he makes a contract with ‘B’ by mistake. In this case, the contract will be void.
COMMON MISTAKE
When both parties are mistaken for the facts related to the subject matter of the agreement. The court can declare the entire agreement as void in such kind of mistake. If the contract contains a small error relating to the subject matter, then there is a very less chance that the court will rule that the contract is void. If any part of the contract that does not contain a mistake is still valid.
BELL V LEVER BROTHERS LTD is an English contract law case decided by the House of Lords. Within the field of mistake in English law, it holds that common mistake does not lead to a void contract unless the mistake is fundamental to the identity of the contract.